Proposition 13 caps annual property tax increases at 2% once you own, but it does NOT cap the initial assessment. When you buy, the home is reassessed to the purchase price. Your mortgage calculator should use the full purchase price multiplied by the local effective tax rate for your first year's tax bill. The 2% cap then limits increases going forward, which is why long-term California owners often pay far less in property tax than new buyers on the same street.

The state average is around $1,405 per year, but that number understates what new buyers in wildfire-prone zones actually pay. Major insurers including State Farm, Allstate, and Farmers have restricted or paused new policies in California. In WUI (wildland-urban interface) zones, the state-run FAIR Plan is often the only option, with premiums running $3,000 to $8,000 per year. Any California mortgage affordability calculation should include an actual insurance quote for the specific address.

The statewide average is 0.71%, one of the lowest in the US. On a $740,000 median-priced home, that works out to roughly $5,250 per year. Rates vary by county and local parcel taxes. Some counties like Alameda and Contra Costa have additional voter-approved parcel taxes that push the effective rate higher.

California charges a documentary transfer tax on real estate sales. The state rate is $0.55 per $500 of value (about 0.11%), but many cities add their own. San Francisco's transfer tax scales up to 6% on sales over $25 million, and Los Angeles has Measure ULA (the 'mansion tax') which adds 4% on sales over $5 million and 5.5% on sales over $10 million. Check the local rate for any California purchase.

California has progressive state income tax reaching 13.3% at the highest bracket. This reduces take-home pay compared to states with no income tax, which means your housing budget on a given salary is lower than in Texas, Florida, or Washington at the same gross income. Lenders use gross income for DTI ratio, but you will feel the difference in your monthly bank balance after the mortgage payment clears.